Month: March 2010
SingTel – BT
SingTel offers pay-TV buffet after mio outage
SINGAPORE Telecommunications will offer customers an all-you-can-watch pay-television buffet for three days to make up for its mio TV outage.
From March 19 to 21, mio TV subscribers will get to view all the broadcast television channels in SingTel’s portfolio for free. The buffet, however, does not include access to its video-on-demand offerings as well as US TV Packs, an ensemble of channels featuring popular shows such as Desperate Housewives and Gossip Girl.
This offer comes on the heels of a three-day mio TV blackout which left thousands of customers fuming last week. Close to six per cent, or around 10,000 subscribers, were shut out of SingTel’s pay-TV service as a result of a suspected software glitch. Customers flooded newspaper hotlines and forums with complaints after failed attempts to reach SingTel’s customer service desk.
According to SingTel’s website, the service has since been fully restored. Customers who are still experiencing difficulty are advised to turn off the power supply to their set top boxes and then switch it back on.
Last week’s outage occurred at a time when Singapore’s largest operator is launching an all-out pay-TV charm offensive after beating StarHub to score the broadcast rights for the next three seasons of the Barclays Premier League.
The coup helped lift SingTel’s mio TV base up by 23 per cent sequentially in the last quarter of 2009 to 155,000.
It added 29,000 new mio TV subscribers for the three months ended Dec 31, the largest quarterly gain since the inception of the service in 2007.
However, the surge in new sign-ups resulted in a manpower strain with some complaining of lengthy waiting times after putting pen to paper.
To resolve the issue, SingTel Singapore CEO Allen Lew previously said the firm has increased the number of installers to cope with the heightened demand. ‘After every single installation, our manager will call the homeowner. It’s not just a random sample check, it’s a 100 per cent check,’ he added.
Transport – OCBC
Prospects looking bright
Transportation stocks fared well in 2009. Singapore public transportation stocks have performed well in 2009, in line with market expectations. ComfortDelGro (NOT RATED), for example, saw revenue from both its taxi and rail operations in Singapore grow by 3.9% and 2.5% respectively in FY09, boosted by larger taxi fleet, higher volume of cashless transactions and an increase in average daily rail ridership. While revenue from its bus operations was 6.0% lower due to fare reduction and lower bus ridership, operating profit was up 163.4% due mainly to lower fuel costs. SMRT (BUY, S$2.05 fair value) similarly saw its revenue from train operations increased by 0.7% for 9MFY10 due to higher rail ridership and contribution from Circle Line (CCL) Stage 3, not withstanding the fare reduction exercise. Its bus and taxi operations, on the other hand, reversed the operating losses in 9MFY09 despite a 4.4% and 2.4% decline in segmental sales.
OVERWEIGHT on Singapore Land Transport sector. Going forward, we continue to view the Singapore Land Transport Sector positively. We believe the Singapore Land Transport (LT) Masterplan, as initiated by government in 2008, would boost the connectivity and usage of public transport significantly. The CCL, part of government’s initiatives to make the rail network the backbone of Singapore’s public transport system, is likely to result in higher rail ridership. According to LTA, the CCL Stage 3 (which started operations in May 2009) will be joined by 11 more stations (CCL Stages 1-2) following the commencement of their operations on 17 April 2010. This is expected to result in a jump in ridership from this stretch of rail network from 30k in last November to 200k commuters. We believe an expected growth in population, higher tourist arrivals from key events such as the opening of the Integrated Resorts may be additional catalysts for a higher ridership number and this in turn will result in higher revenue for public transport operators. In July, PTC is also expected to exercise another fare revision for both bus and train. We are banking on flat-to-marginal increase in average fares, or limited downside from current fare levels.
SMRT as preferred stock. SMRT is our preferred stock for the sector as we believe it is the key beneficiary from the LT Masterplan (operator of CCL). We see possibility for commuters to switch from other modes of transport to rail when the CCL is progressively opened for operations. We also like its defensive nature, strong operating cashflows and decent yield of 4.1%.
TELCOs – CIMB
4Q09 results round-up
• No surprises in 4Q09; maintain UNDERWEIGHT. 4Q09 results of all three Singapore telcos were fairly in line, with typical seasonality. Highlights were: 1) rather poor service revenue growth although mobile revenue continued to improve; 2) weaker margins; and 3) continued ARPU and revenue pressure in fixed broadband and corporate data. We retain our UNDERWEIGHT position on the sector as we remain apprehensive about rising content costs, pressure on broadband ARPUs and escalating subsidies. While we leave our DCF-based target price of S$2.07 (WACC: 9.5%) intact, we downgrade M1 from Outperform to NEUTRAL as it has outpaced the market by 9% since our upgrade and our house continues to prefer higher-beta and cyclical stocks. Nevertheless, M1 remains our top Singapore telco pick for its capital-management potential and greatest upside to NGNBN. Avoid StarHub (UNDERPERFORM, TP: S$2.14) and SingTel (UNDERPERFORM, TP: S$3.30).
• Weak service revenue… Service revenue growth decelerated to +1.3% yoy in 4Q09, the second lowest ever, due partly to competition despite a recovering economy. M1’s mobile revenue was weak from lower voice usage and roaming in postpaid and IDD revenue. StarHub’s fixed broadband and corporate data revenue came under pressure from competition while SingTel’s IDD revenue was lower from lower rates. Mobile revenue grew 5% yoy in 4Q09, driven by growth at SingTel and StarHub from their larger customer bases.
• …and margins. EBITDA margins slipped from seasonality and iPhone-induced SACs. With M1 and StarHub launching iPhones, industry EBITDA margins fell 2.6% pts qoq to 33.5%, the lowest since we began keeping records in 1Q04. Fixed broadband and corporate data revenue remained weak as competition remained rather heavy in those business verticals.
• Uninspiring outlook. M1 and StarHub gave fairly lacklustre 2010 guidance but we believe M1 is low-balling expectations. We believe Singapore telcos will benefit from the recovering economy and rising tourist arrivals with the opening of two integrated resorts. M1 should benefit the most as it is a pure mobile operator. SingTel has maintained its muted guidance of low-single-digit growth for revenue and EBITDA for FY3/10 which should easily be achieved with the help of A$ strength and strong growth in its IT and Engineering division from NGNBN rollout. On the downside, we expect competition to stiffen in the residential and corporate broadband markets throughout this year while content costs should remain a medium to long-term issue. We do, however, expect heavy subsidies for devices to persist in line with recent trends.
SPH – DBS
Strong AdEx recovery, higher DPS
• Jan AdEx jumped a strong 26% yoy; recovery not fully reflected in share price
• Upsized S$600m MTN a positive move – higher dividends or investment on the cards
• Raise our DPS expectations; sustained yield of 6.6%-7.2% is an attractive proposition
• Proxy to recovering economy, a key pick in current market conditions; Reiterate Buy, TP: S$4.32
Strong AdEx growth in January implies potential upside to forecasts. Data from Nielsen Media Research shows AdEx for display and classifieds grew by a strong 26% yoy in Jan and 7.8% for the period from Sep-Jan. This is inline with our full year assumptions of 8% for FY10F, but believe there could be room for upside revision arising from activities such as (i) opening of Marina Bay Sands, coupled with more retail space; (ii) pick up in employment and hence recruitment ads; (iii) more property launches, etc. Newspaper operations PBIT should see a sharp 28% growth in FY10F, after the 24% drop in FY09. Our sensitivity analysis shows that a 1% change in ad revenues growth will impact newspaper PAT by 1.6%.
S$600m MTN – a positive move. The upsized S$600m MTN issue (i) reflects market confidence in the company’s fundamentals; (ii) capitalizes on the low interest rate environment at 2.81% pa; (iii) secures funding for Clementi Mall; and, (iv) signals the possibility of investments and/or higher dividends (along with completion of Sky11).
Clementi Mall saga priced in; potential S$22-26m from M1 capital reduction. We believe Clementi Mall overbidding saga has been priced in; and, a repeat of an overbidding is unlikely. We could see additional cash for SPH (1.3-1.6 Scts/share), from a capital reduction exercise by M1, expected by our telco analyst.
Raise DPS forecasts, potential yield of 7.2%. We have revised our DPS expectations to 27 Scts (+2 Scts) and 25 Scts (+5 Scts) for FY10 and FY11 respectively. FY10F EPS trimmed marginally by 2.6% on higher interest expense, excluding returns from application of funds. We like this counter as a proxy for the recovering economy, coupled with its attractive yield of 6.6%-7.2%.
Raffles Medical – DBS
Strong pick up in patient load
• 4Q net profit exceeded our expectation on pick up in patient load and margins expansion
• Potential special dividends on high net cash level (c.S$90m/17.3Scents) by FYE10F
• Raise earnings by 17%/24%; CAGR of 21%
• Upgrade to Buy, TP raised to S$1.75 (33% upside)
Strong 4Q, net profits up 25%. 4Q revenue increased 13% yoy to S$58.3m driven by both Hospital and Healthcare services division, 8% above our expectations. 4Q EBIT margins expanded by 1.1ppt yoy and 1.6ppt qoq on slower growth in staff costs (+12%), other operating expenses (+3%) and lower depreciation (-3%). Consequently, net profit grew a strong 25% yoy to S$11.9m, above streets’ estimates (S$10.3m) and ours (S$9.6m). Net profit for FY09 ended at S$37.9m, a strong 20% growth in a year of recession. A 2 Scts final dividend was proposed, bringing FY09 total dividend to 3 Scts (FY08: 2.5 Scts).
Higher patient load, 4 new clinics in FY10. Management attributed revenue growth to a pick up in patient load as the economy climbs out of recession and fears of H1N1 fade. 4Q growth was stronger than expected and management projects momentum to continue. 4 new clinics will be opened in FY10F, adding to its existing network of 71 clinics in Singapore.
$50m net cash in kitty. The Group has cash holding of S$74.4m or S$50m (9.6 Scts/share) on a net cash basis. We project that the net cash will balloon further to S$90m (17.3 Scents/share) by end FY10. If the funds are not deployed, there is a high potential for special dividends, in our view. Assuming it retains S$50m net cash, this would avail up to S$40m for dividend distribution, equating to c.7.7 Scts/share.
Strong growth ahead; Upgrade to Buy, TP: S$1.75. The growth trend should continue, and with operating leverage, we raised earnings by 17%/24% for FY10F/FY11F. TP raised to S$1.75 pegged at 20x (historical mean) on FY10F EPS. Buy for its: (i) proven track record; (ii) improving operations; and, (iii) strong growth (15.6x PE, PEG 0.75x<1x). Catalyst could come from acquisitions or special dividends given its high cash level.